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May 09, 2016 16:49:38
PTBA: The coal upgrade
Coal analyst, Janeman Latul upgrades Bukit Asam earnings on the back of better ASP from higher value coal and improvement in cost management. He also emphasizes on railway debottlenecking which should propel the contract fulfillment with PLN. All the positives aside, Janeman still has his concerns on global coal prices. Thus, following the 50% rally YTD, he cuts his rating to O-PF from BUY but increase our target price 32% to Rp7,500/share from Rp5,700/share
- Following the 1Q16 good result, Janeman increases his assumption on ASP considering higher coal while at the same time factoring in China macro data and the demand environment to be generally constructive through 1H16 before tailing in the second half as policy support adjusts.
- To manage the cost better, Bukit Asam shifts from renting heavy equipment & vehicles (among the biggest COGS items) to buy the equipment. PTBA bought Satria Bahana Support (SBS) to do its coal mining services last year and reducing Pama’s role over time.
- Janeman believes in Bukit Asam’s debottlenecking from railway capacity improvement. He forecasts a modest 11% 3-years Cagr on the railway haulage, which will help boost its sales tonnage to 25.5mn tons in 18CL, a 10% Cagr.
- Minor adjustment on 16CL coal price increase by 1% while for 17-18CL our regional team sees flat seaborne thermal coal prices as RMB devaluation erodes the small upside forecast in Chinese coal prices.